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spk00: in the Canadian market. Last year, their annual sales totaled approximately 250 million Canadian dollars, and their revenue has continued to grow as they continue to execute successfully on their marketplace strategies. Source Atlantic was not for sale. When we contacted the owners, we know how rare it is to get the opportunity to purchase a company directly from the owners with such a long, rich history that has not been traded in the marketplace. This business began in the 1860s, and has been under the Irving family's thoughtful stewardship for the past 80 years. Through our M&A diligence, we discovered this to be an exceptionally clean business with excellent customer and supplier relationships, nurtured around a tremendous culture the Irving family has fostered and developed over decades. When we look at the net assets acquired between the net working capital and real estate holdings, the excess purchase price, or what I often risk as our airball, referred to as our airball, is relatively small compared to many scores of other high quality acquisitions of industrial businesses that we've considered or acquired over the last decades. In collaborating with the Source Atlantic leadership around the power of this effort to pull together our combined resources and capabilities to even better elevate each of our businesses, we identified significant opportunities to leverage their existing investments in people, working capital, specialty service capabilities, and facilities with our existing investments in the same and Canada, most specifically with our Bolt Supply House and with our significantly large Lawson VMI Canadian team where together we will significantly lift over the next 18 months the combined profitability and returns on invested capital. As a reminder today, our Bolt Supply House operates from Western Canada and is uniquely complimentary to Source Atlantic's largely Eastern Canadian business. DSG's acquisition of Source Atlantic creates significant scale and geographic expansion potential by executing a strategy to grow our footprint, value added services, and incremental product offerings across Canada, allowing for us to enjoy line of sight towards a leadership offering for our colleagues and customers in Canada. With minimal customer overlap with our Bolt Supply customers and our Lawson VMI customers, and enjoying an expanded set of capabilities and offerings, we have a lot of white space in Canada upon combining these businesses outside of the initial lift in return metrics that we expect by the combination. Our existing MRO customers and employees under Bolt Supply and Lawson Canada are important to our decision to pursue this acquisition, as well as our strategic and revenue growth lens across DSG's three verticals. Our Bolt customers are concentrated in Western Canada and primarily span British Columbia, Alberta, Saskatchewan, and Western Manitoba. Although these provinces in Western Canada cover a large geographic footprint, they only represent about 28% of the current Canadian MRO market. By contrast, Source Atlantic's geographic concentration has a rich history principally focused on excellent coverage of all of Eastern Canada. From market perspective, Ontario and Quebec represent 67% of the MRO, with strong industrial activity just north of our Great Lakes US presence. Given the opportunity to offer expanded support to industries and end markets in that region, the opportunity to engage with expanded scale across Ontario and Quebec will allow us to together grow faster with our combined MRO solutions and specialty services, which we prioritize as an exciting strategic opportunity for our shareholders, colleagues, and customers. In addition, Source Atlantic's strong historic presence in Nova Scotia, Newfoundland, and Labrador, representing another 5% of the Canadian market, offered new territories for bolt and loss and to introduce their capabilities. These new and existing market expansion and penetration opportunities are exciting. In addition to expanding customer presence in Canada and getting more utilization out of our combined capabilities and footprint, the total addressable market expansion and ability to drive real value creation for our shareholders makes this an extremely compelling business to add that fits nicely into exactly what we are trying to accomplish with our M&A playbook. Just like we were excited to have landed S&S Automotive only a couple of months ago. If you can't tell, we're thrilled with this opportunity to add these two excellent companies with their long established leadership positions to enhancing our offering and driving our return metrics at DSG. Our acquisition of Source Atlantic expands DSG's Canadian MRO addressable market to approximately $41 billion. And this market is expected to grow annually by four to 5% through fiscal 2028. Our DSG strategic lens prioritizes additional ways for DSG's other verticals, besides our MRO VMI offering, to also leverage Source Atlantic and bolts enhanced position in the Canadian market to improve growth and what we broadly see as a growing Canadian marketplace for our offerings. While Source Atlantic operates today at margins lower than DSG, like we did with Bolt after we acquired it, we expect to drive both Source Atlantic and our total Canadian opportunity to higher structural margins via scale and synergies across our platform in Canada. Similar to how we are focused on driving structural margins up in the United States, like with our infill density and capability acquisitions of SNS, and our focus on adding more scale around PP&E and safety categories in our MRO VMI offering. Over the next 12 to 18 months, we target EBITDA margins for the combined Bolt Source Atlantic in the low double digit range and a path to have Source Atlantic be significantly accretive to our DSG return on invested capital framework. We also expect Source Atlantic margins on a run rate basis to be accretive to the consolidated DSG EBITDA margins by the end of 2025. We plan to fund this acquisition through our existing available liquidity. Ron, will you walk through our detailed second quarter results and funding sources for Source Atlantic? Ron.
spk01: Thank you, Brian, and good morning, everyone. Turning to slide six, I'll summarize reported results for the quarter, and then I'll break out each of the reporting segments. I'm excited to share these results, given the step up in our adjusted margin as a percent of sales and also in realized dollars for the quarter. Consolidated revenue for the quarter was 439.5 million. This represents an increase of 61.6 million or 16.3%, primarily driven by 2023 and 2024 acquisitions. Excluding the acquisitions, organic sales declined by .7% versus a year ago, however, grew .8% sequentially over the first quarter. The sequential increase was driven by the continued recovery in many end markets, such as test and measurement, technology, renewables, and some project-related business. Q2 2024 reflected significant growth in net margin dollars of 9.1 million, up over 25% versus the first quarter. Our margin profile came in line with our near-term expectations and exhibits the strength of our model on a modest sales increase. For the quarter, we generated adjusted EBITDA of 45.2 million or .3% of sales, a sequential improvement over our margins of .7% in the first quarter and .4% in Q4. I'll expand further on this at the segment level here in a minute. We reported operating income of 14.2 million for the quarter, inclusive of 12.2 million of acquisition-related and tangible amortization expense, and 12.5 million of aggregate costs from stock-based compensation, acquisition, severance, and retention-related expenses, merger and acquisition costs, and other non-recurring items. Adjusted operating income was 38.9 million as compared to 34.9 million a year ago quarter and 29.8 million in the first quarter. We reported gap-diluted income per share of 4 cents for the quarter, inclusive of higher depreciation and amortization and evaluation allowance on certain deferred tax assets compared to earnings per share of 7 cents in the year ago quarter. Adjusted EPS was 40 cents for the quarter, up from 25 cents in the first quarter, compared to 42 cents a year ago on 3.6 million more shares outstanding. Turning to slide seven, let me now comment briefly on each of the operating segments. Starting with Lawson, sales were 121.1 million, up .7% on comparable days from a year ago, primarily from very strong comps a year ago quarter of nearly 11% and the SNS automotive acquisition that closed earlier this quarter. As compared to the first quarter, sales increased 2.5%. This growth was driven by the acquisition of SNS automotive in May, which contributed 7.3 million in sales in the second quarter. Excluding this acquisition, organic sales were down .2% from the first quarter, given some of the softness in various end markets and on a lower field rep count. We continue to see a strong pipeline in new strategic customer agreements, but these have a longer implementation cycle, so the associated revenues are not yet being realized. We continue to realize improvements in our sales rep productivity, with the second quarter being up nearly 9% on top of 8% realized in the first quarter in double digit increases in the last two quarters of 2023. In the aggregate, we're generating more sales dollars on a per rep basis. This helps the sales reps have a larger book of business and earn more commission dollars. For the quarter Lawson realized adjusted EBITDA of 16.5 million or .6% of sales up 220 basis points over the first quarter. Of the margin growth of 3.1 million, approximately 1.1 million came from our acquisition this quarter. The acquisition helped raise Lawson's margin by approximately 11 vips for the quarter. The remaining margin expansion came from almost, came equally almost from both organic gross margin improvements and related cost controls. Turning to Jexpro services on slide eight, total sales for the quarter increased .6% to 107.1 million over Q1. As indicated in our previous calls, we were seeing some end market recovery starting late in 2023 into the first quarter, which continued through the second quarter, in particular within technology and renewables, while aerospace and defense remained strong. We feel good going into future quarters that these end markets will continue to expand, allowing us to further leverage our operating expenses. As expected, we saw in Q1 and again in Q2, some recovery in sales, along with a focus on gross margin improvements and cost controls. We continue to expand our margin profile over the past two quarters. Jexpro services EBITDA was 12.7 million, a sequential increase of 1.9 million over the first quarter to .9% this quarter. Of the 90 basis point improvement from Q1, approximately 120 basis points was from operating leverage and cost controls on slightly lower gross margins. Lastly, I'll turn to test equity group on slide nine. Second quarter sales grew .1% to 197.5 million in increase of 61.4 million driven by the 2023 acquisition of Hisco. Excluding Hisco test equity sales were down .2% over a year ago quarter, however, we're up .5% sequentially over the first quarter. As we've discussed on previous calls and similar to Jexpro services, we started to see some recovery in various end markets in Q1 that continued through Q2. For example, the test and measurement business is still down nearly 3% from a year ago quarter, but was up nearly 18% sequentially over the first quarter. Additionally, Chambers, albeit a smaller piece of our business had soft sales in late 2023 and the first quarter of 2024, but was up nearly 40% sequentially as we improved our stocking position of these units. Test equities adjusted EBITDA for the quarter was 15.4 million or .8% of sales. Net margin dollars were up 3.8 million sequentially representing over a 30% improvement. As indicated previously, we have a roadmap developed to build the combined test equity in Hisco business back to double digit margins. And we took a nice step in that direction this quarter. As we think about the remainder of 2024 for test equity, we will continue to focus on the integration of Hisco and test equity. We remain committed to sequentially improving our margin profile as 2024 develops through higher sales, synergies to be realized on the combined company and proactively rebalancing our cost structure. Between the merger savings and other cost normalization, we're focused on delivering approximately 15 million of cost savings in 2024, which are starting to be realized. Moving on to slide 10, we ended the quarter with approximately 210 million of liquidity, including 56.9 million of cash and cash equivalents and 153 million under our existing credit facility. We did close on the SNS automotive transaction during the second quarter through using a portion of our available cash and our existing credit facility. Our leverage rate of 3.2 times at the end of the quarter is well within our stated range of three to four times. We do expect this to be in the mid threes upon closing of our previously announced acquisition of Source Atlantic later in the third quarter and then we'll be able to de-leverage into the low threes by year end. Net capital expenditures, including rental equipment were 4 million for the second quarter and 6.9 million on a year to date basis. We expect full year capbacks to be in the range of 15 to 20 million or approximately 1% of our revenues. Before I turn the call back over to Brian, I'd like to make some comments on how we see the remainder of 2024 developing. As we've discussed over the past two quarters, we were up against tough organic comps. While these comps do become easier in the second half, we do see some softness in our shorter cycle MRO business offset by continued recovery of various end markets within our OEM and industrial technology verticals. As we make traction on many of our initiatives in 2024 in this comps against the prior year soften, we would expect organic sales growth to be flat to slightly positive in the second half. However, we remain cautious given the current macro economic environment. To achieve our internal sales plans, we will need some normalization of various end markets and some recovery of customer capital related project spending. We also expect while not linear with improvements that we realized sequentially over the first quarter, that all three verticals will expand their margin profiles in the second half of 2024 over our most recent Q2 run rates. I'll now turn the call back over to Brian.
spk00: Thank you, Ron. Turning to our capital allocation framework on slide 11. Our DSG model works well because we are committed to a discipline and competitive approach to capital allocation and holding ourselves and our colleagues to be accountable to build a business that will sustain driving a long-term compounding effect for exceptional shareholder returns. As part of that framework, our leadership team is focused on efficiently and continually managing working capital, which results in discipline around stronger cash flows, allowing for more deliberate reinvestment. Our trailing 12 months of cash from operations was $106 million on trade work and capital of approximately 450 million at the end of the quarter. Cash flow per share is an important driver to our model as we focus on the compounding effect of cash flow reinvestment. In our DSG journey over the last two plus years since the merger, we've proven that strategic, bolt-on acquisitions are providing our platform with scale to sustain and drive higher long-term organic growth, margins, and returns on invested capital through creating better geographic density with added product and service categories, offering expanded cross-selling opportunities, and ultimately the very tangible bridge to the higher structural margins and returns on invested capital that drive exceptional shareholder returns. Over the last decade, from where we are today, we've enjoyed a 14% IRR on our loss in investment, and I am confident we will do better over the next decade with the expanded discipline and opportunities presented by DSG. As our platform matures over the longer term, we expect that growth in our current key verticals should come more from organic than inorganic sources, and that we can fade our DSG returns on invested capital structurally higher from the approximately 12% level where we are starting. Our five-year goals that we set out during our investor day last year include revenue of over $3.3 billion and an EBITDA of over $450 million with 13 to 14% margins, and we are excited that we can see how we have made significant progress towards those goals over the last year. As Ron covered, we will continue to judiciously focus on managing our leverage and debt service. We also wanna underscore that as part of our commitment to a disciplined capital allocation framework to drive shareholder value long-term, share repurchases will continue to be a part of our capital strategy, as we believe we have great line of sight on how our intrinsic value creation journey is dynamically progressing. So it makes sense that we also use some of our capital opportunistically to engage in a creative moments where the share price may reflect an attractive enough discount to what we see as our intrinsic value in the near term. We will continue managing our business and cash with tight discipline and focus. Let's turn it to slide 12. I wanna discuss our three business verticals and provide some outlook commentary. We had been signaling that our 2024 first half comps would be under pressure with easier comps in the second half. At this point, that is still our informed lens, but we are continuing to see choppiness with certain customers and in certain end markets as the macroeconomic lens has not offered more broadly our customers a clear and confident path to economic expansion. All that said, we are also pleased to see progress in certain key markets that appear to have returned to growth and other pockets where we see green shoots. Most of our marketplaces broadly feel reluctant to lean into purchases and stocking skews for growth. Although there are choppy but improving sales trends in a number of our end markets and industries. At Test Equity Group, we enjoy double digit sequential improvements in sales volume for the test and measurement division due in major part to return of the tech and automotive sectors. We are refining our go to market strategy and as we put real effort into a transition around greater consistency in our approach away from a more transactional customer relationships to a much more solution sales approach, we're hiring test and measurement specialists for our solution sales approach. In the second quarter, we enjoyed sequential solid sales lift in our chamber equipment compared to the first quarter. Cross selling opportunities are gaining traction. As we've discussed, like on chambers, our switch from a third party manufacturer to internal manufacturing through Jexpro services reduced order lead times and kept profit margins internally within DSG driving the future better structural margins and return on invested capital for both Test Equity and Jexpro services. This insourcing initiative has streamlined our supply chain and significantly reduced lead times from 30 weeks to less than four weeks. And today for the first time, since before COVID, we are fully back in stock in chambers. Other insourcing abilities for our companies are identified where we can work together and it is an important lever to continue to pull outside of our cost rationalization and operational efficiency objectives to drive margins and returns longer term. Finally, our Hisco integration actions are tracking on schedule and our cost takeouts through the first half of 2024 have exceeded our original projections. Our current strategic focus on this leg of the platform is expanding wallet share with customers, driving repeatable business and consumable segments and optimizing digital selling capabilities. We are excited about the road ahead for the Test Equity Group and the continued progression we expect out of margins and returns on invested capital. At Jexpro services, we've sequentially improved sales and EBITDA margins quarter over quarter since the 2023 fourth quarter, fueled by strong double digit growth and important in markets. Aerospace and defense and technology continue to be a bright spot with year over year growth as well as sequential increases through the first half of 2024. In addition, the renewables in markets were strong with double digit growth this quarter and double digit growth in the second quarter versus the first quarter of 2024 and they show the promise we expected for the back half of the year. The frontier and Resolux acquisitions continue to present expanded opportunities as we evolve them into successfully collaborating versus competing with these great businesses that we acquired. Our overall backlog, bid to quote and book to bill measures continue to be constructive and we enjoy a quarterly ramp up in this business. Based on last year's second half slowdown, we expect easier comparisons and favorable trends in 2024 for the second half of for Jexpro services. Our outlook is to continue to invest in growth segments like aerospace and defense, industrial power and automotive and fully expect an acceleration top line in 2024 and beyond. For Lawson, we continue to invest in areas that will increase sales in the short, medium and long term. As Ron mentioned, we implemented the next phase of our Salesforce transformation and went live with our CRM tool during the second quarter. This tool allows us a more data driven approach to the sales organization and we have identified 70 new sales reps for the targeted territories in our CRM. After getting through many of our initiatives to invest in tools and opportunities for our Salesforce to become more effective and earn more, it is now time to fill back in all those open and optimized territories with a recruitment lens that we expect will yield better opportunities for candidates than in the years earlier experiences around recruitment of outside sellers did. We also know that training new and existing reps on a refined engagement process will produce a more consistent and even order flow for our customers and our sellers. We are implementing initiatives to work with district sales managers by encouraging more sales calls and efficient time management as a critical part of this transformation to drive more revenue and productivity through our sellers and the opportunity to share more of that with them. For the second quarter, net rep counts were up and attrition was down on better productivity but we still need to hire at least another 70 reps. We also realize that these new reps need a few quarters to ramp up which has us remind ourselves without any crystal ball of informed insight that Lawson's performance may not be linear from quarter to quarter. Earlier this year, Lawson acquired emergency safety supply or ESS and S&S automotive. As a reminder, ESS drives product brand extension for Lawson in the safety category while ESS expands the Kent automotive division's presence in the auto collision repair market, concentrating more on dealerships. Brand and line extensions will allow this business to grow, improve margins and scale into new geographies and categories that reduce business risk. As we discussed at the beginning of the call, we are very excited about Lawson Canada in bold and they will be well positioned to provide customers in Eastern Canada with value added MRO services and access to other specialty products through our acquisition of Source Atlantic and that our total Canadian opportunity will be greatly enhanced by pulling these businesses together under DSG's broader specialty capabilities. Turning to slide 13, as we move into the second half of 2024, we are confident and enthusiastic about our prospects to grow and create shareholder value. DSG serves large, highly fragmented marketplace needs with specialty offerings and value added capabilities across diverse end markets. We offer unique total customer value proposition with high touch service models, distinct capabilities and product assortments across our platform. Leveraging the power of three, DSG's collaborative business verticals offer highly embedded value added services and it is not surprising that we have well over 90% customer retention. Since we merged these companies just over two years ago, we have discovered new and expanded ways to cross sell, in source products and production and further leverage our scale to unlock value. We were ambitious with our objectives for DSG and for each of the three verticals individually as well, coming into the creation of the platform, but our expectations have only increased as we have collectively gained an even more informed lens around the opportunity in front of each vertical inside of DSG as well as for DSG overall. Our process improvement and optimization initiatives, much evolved and expanded from where we started, are well underway and we are in the early innings of our programs to deliver higher structural margins at each of the verticals. Our product development plans and expanded insourcing and value added service programs are continuing to come into greater focus, built around not only a strategic lens, but also financial compounding lens as well, like we outlined previously for Lawson, where we put in an initial concentration on greatly improving our safety and power hand tools categories, which drives total productivity of the sales force, organic revenue growth and returns on our invested capital. We're driving our returns on invested capital framework down through our individual business verticals to each of their follow on acquisitions. So there is clear accountability and a highly informed set of objectives in what we acquire and how we drive performance out of those investments and how they add to our DSG objective to drive total long-term compounding in the platform. We have an active M&A pipeline and a highly strategic playbook to facilitate the integration and understand what improvements in all the initial metrics must look like for a business unit to effectuate the capital allocation to make an acquisition and how that must also drive more total value for all of DSG. Today, more than before we created DSG, our verticals continue to expand their capabilities to better serve their existing customers, as well as prospective customers through the entire life cycle of all of DSG's customers within our various end markets, leveraging and actively expanding and improving the world-class global supply chain platform we are building at DSG. And we're just getting started. Finally, we will continue to work on DSG's targeted investor outreach. In August, we plan to attend the Midwest Ideas Conference in Chicago. This fall, we will participate in the Jeffreys, Baird and Stevens conferences, plus a non-deal road show in the mid-Atlantic. With that operator, we would like to open the call for questions. Thank you.
spk03: Thank you. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask, if listening on speakerphone this morning, that you pick up your handset while asking your question to provide optimal sound quality. Once again, if you wish to join the queue to ask a question at this time, please press one on your telephone keypad. Please hold a moment while we poll for questions. And our first question this morning is coming from Kevin Steinke from Barrington Research. Kevin, your line is live. Please go ahead.
spk02: Thanks and good morning. Morning, Kevin. Morning, Kevin. Good morning. Wanted to start out by asking about the test and measurement business within test equity. Sounds like some recovery going on there. Last quarter, I got the impression that maybe that market was recovering a little more slowly than you had anticipated. You've been talking about excess inventory in the market. So just maybe talk about the pace of the recovery there and what you expect for the second half and just overall the state of inventory in the market and customers' plans for capital spending in that area, et cetera.
spk00: Rod, why don't you start there?
spk01: Yeah, I'll jump in. Thanks for that question, Kevin. So we mentioned this a little bit on the first quarter call as well that we were starting to see some sequential improvement in the test and measurement business really as each month surpassed in the first quarter. We continue to see that trend here in the second quarter as well. And even though we feel like there's some market recovery there, certainly interest rates really haven't moved since the end of the first quarter. And I would really probably describe it more that we're taking share candidly. I think you're well aware that that's a very vendor relationship type of business on the test and measurement side. And we've continued to work really, really hard with our top suppliers in order to gain more of their business. We've had a couple of customers that we've regained that really kind of faded off on us in 2023. So that's helped build it as well. As we think about the rest of the year, certainly the overall interest rate environment, I think we'll probably still put some pressure on that overall end market. But we've got great initiatives going on internally within the test equity group in order to expand those supply relationships and to go back and get some of these customers that had faded a little bit on us in 2023. So, and as I mentioned, the first, I mean, if I look at the first six months of the year for this year, it's a nice sequential movement in the right direction. So we feel good about that piece of our business continuing to lift us for the rest of 24.
spk00: Kevin, just to add to that, we messaged, I think, after the end of the fourth quarter, and again, at the end of the first, that there was some lack of, there was some purging of inventory that was taking place by some people who had entered that marketplace with an inventory position that they hadn't historically been as big of a participant in selling those vendors' products. And so there was some undisciplined, in my opinion, markdowns by some folks that we might submit an RFP, or somebody may have come to us for technical support, made your customer, somebody we've worked with and consistently worked with for years. We did, we would spec out a purchase and then somebody would come in underneath us and dump some inventory. And that was, created some additional choppiness over the first, kind of the end of the last year and the first quarter of this year. A lot of that seems, appears to have abated itself. So that's where picking back up the same customers, that those orders were out there. We were actually doing the spec work on them. And then we just lost them at the goal line by not breaking discipline on pricing. In some cases, we probably look back in the fourth quarter and wonder whether or not we should have taken those orders, but we wouldn't have cleaned the market with that kind of excess inventory that was in the channel for some of the smaller competitors that don't have as much market share selling those major manufacturers' products in North America. So that's part of it. We do think that there's some green shoots. We are seeing some in-market customers that are returning. We highlighted a couple of them in the call, but to the test and measurement area. But we're still being cautious in terms of capital spending, just given until we see interest rates in the marketplace appearing to have more confidence that we're back in economic expansion. But there is just some cycling of purchases that we're seeing come back in and that we're getting more of our share than we were at the end of the fourth quarter.
spk02: Okay, that's all very helpful commentary. Appreciate it. And, Ron, you mentioned when talking about second half that you're seeing some softness in short cycle MRO. You know, you saw some organic revenue softness in Lawson in the second quarter. Can you maybe expand on that a little bit more? Is that market softened up a little bit more than you might have expected entering as you enter 2024?
spk01: Yeah, so, Kevin, as we look at our kind of end segments that we manage the Lawson business within our strategic customers and military, our core street business and Kent Automotive, we have seen some softening across most of those segments. As we look at the second quarter and even a little bit in the first quarter, ISM is still running well below 50. We've seen probably a bigger impact on the military. I know we talked about this on our first quarter call just in terms of the ordering process. That volume has not yet fully come back to us. So, we're a little cautious on the short cycle piece of this business within Lawson. And the other piece I would say, and Brian commented on this in his prepared remarks, we are actively out recruiting and hiring new sales members, expanding our sales team. Certainly, we took that down as we were refining some of the process, and now we're in a position where we feel like we're in a really good position to build that back up. And we're targeting to hire nearly 70 individuals between now and the end of the year. And so, that will give us a little bit of a lift here in 2024, but in reality, those hires will benefit 25 and 26, certainly more than 2024. So, we're a little cautious on the Lawson side right now. I mean, you saw really nice net margin expansion and I think going, call it from the mid-11s to the mid-13s, kind of back to where we were on a full run rate basis in 2023. So, we're managing the business daily from a cost perspective and from a gross margin perspective.
spk00: Yeah, and Kevin, I think your intuition is right there. What's been surprising, I think, a little bit to all of us is that the longer cycle, the OEM visibility appears to be getting or staying firm or getting better, especially across some of our markets like renewables and technology and aerospace defense on the Jet Prop Services side. And even that's firming some on the test equity group side. And we're obviously going to lap some easier comps there as well. But our operating with less salespeople than we did a year ago or two years ago, we knew it was going to weigh some on our ability to drive organic growth in Lawson, but it was critical to our strategy to driving returns on invested capital and EBITDA margins higher and ultimately cash dollars higher. And so now we're layering back in that growth lens on filling in optimized sales territories and with optimized tools. We thought it was premature to do that until we got some of those pieces better lined out for new hires and could bring them in with a clear expectation and a clear opportunity that was maybe different than some of the way that we had onboarded salespeople several years ago. And I think they have an opportunity to earn a lot more and the quality and experience that they'll have, we think will be allowed for us to hire even better consistency on new hires there. So that's a big part of it. But there's no doubt when we look at the short cycle side of the business and we're going through each customer that's a repeat customer and the size of their orders, there's been a lot more noise in it over the last several months than there was at the last half of last year.
spk01: Yeah, Kevin, I just wanna, Kevin, I wanna put just one maybe additional data point out there for you. So, and it really, I think it follows onto Brian's comments. I mean, we are, I mean, we're a more profitable organization within Lawson, given a lot of these changes, operating now in the mid-13s versus the high single digits going back a couple years ago. And even though we saw some sales pressures into the second quarter, if you look at Lawson, the net margin dollars realized is up almost $9 million going from Q1 into Q2. Now, call it about a million, million one of that was the acquisition that we made kind of mid-20, mid in the second quarter. But structurally, we're a more profitable business and to Brian's point, we're now, I think we're in a much better position to go out and put full court press on filling in some of these open territories, given some of the structural changes we've made over the
spk04: last year to 18 months.
spk02: Okay, thanks, that's helpful. And lastly, I wanted to ask about Source Atlantic. Congratulations on that agreement. Looks like it'll be a really nice deal for you. And you did mention, it obviously hasn't closed yet, but it's a bit lower margin than consolidated DSG right now, but you have plans to improve that over time. Again, as we think about layering that into our model in the future when that deal closes, can you talk to how much of an impact that could potentially have on your consolidated margin? I know it's not a overly large acquisition, but Ron, I don't know if you could touch on that at all.
spk01: Yeah, I can. So, and maybe I can give you a couple of points of reference to without giving specific numbers. So, Brian had mentioned that really getting that piece of the business to a run rate, double digit EBITDA margins, exiting 2025, and we did mention the 250 million Canadian dollars, and maybe the best way to frame it up is, when we purchased Bolt Supply, we were in the, call it mid to high single digit, and I would say, and we've now pushed that business up into the 13 to 14% range from an EBITDA perspective. I would put Source Atlantic kind of in that same initial, kind of out of the gate in terms of when we bring them in here later this year. So again, not a huge impact to 2024, given our overall billion-eight in sales and 180 million in EBITDA, but probably you'll see a bigger impact as 2025 develops, going kind of from that mid to high single digits into double digit territory by the time we get out of 2025.
spk02: Okay, thanks, I appreciate the commentary. I'll turn it back over. Great, thanks,
spk04: Kevin.
spk03: Thank you, Kevin. Thank you, and as a reminder, if you wish to join the queue to ask a question at this time, please press star one on your keypad. Once again, that'll be star one if you wish to join the queue to ask a question. Please hold a moment while we repost the questions. And there are no further questions in queue at this time. I would now like to turn the floor back to Brian King for closing remarks.
spk00: Okay, thank you, operator. Thank you, everyone, for helping us or joining us today. I know that we've got a lot of other distributors that in a nine o'clock call for many of you. So thank you so much for joining us. We look forward to talking to you for the next quarter's earnings and have
spk04: a great balance of the summer. Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day.
spk03: Thank you for your...
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